US Health Care Tax

Recently, the least intelligent and informed of us have suggested that Canada should become the 51st state. This is beyond stupid. I cannot imagine anyone in Canada would want to become part of the US, we have nothing to offer them.

One reason often cited is the US has lower taxes than Canada. But is that really true? Canadian health care is paid thru their taxes. US heath care is a piecemeal of different costs and coverages. If you one was going to set out to design an expensive inefficient health care system, it would be almost impossible to design one worse than the US health care system.

So it seems to me, when comparing taxes between the US and Canada, if is only fair to include what I call the US health care tax. In other words, US households must add to their total paid federal taxes to the amount they pay for health care.

An easy way to do this on a National level is add to your federal tax liability the per capita cost of health care in the US which as of 2023 was $13,432 per person. Let’s assume a US worker and Canadian worker each earn $75,000 and are single filers. The US worker lives in MN and the Canadian worker in Manitoba. The US worker would pay about would pay about $14,000 in state and federal taxes while the Canadian worker would pay about $15,000 in provincial and federal taxes. But, if you add in the US health care tax of $13,000 per capita, the US worker pays about $27,000 state/federal taxes and health care expenses. Since heath care is built into the Canadian’s provincial/federal taxes, his/her actual spendable income is much higher.

One reason for this is the per capita cost Canadian health care is $7,032, almost 50% than US heath care.

Minnesota is considered to be a high tax state. What about states with low or no income taxes. If you add $13,000 to $8,300 [federal taxes only], it is still over $22,000. Still significantly more than the Canadian worker pays for incomes taxes and health care. And if you look at health care by state, I did, generally the low tax states have lower quality health care.

Is US health care is better than Canada’s? The quick answer is NO, not even close. The Legatum Institute, a London-based think tank, in its 2023 report ranked 169 countries by health care, Canada came in 31st while the US came in 69th between Armenia and Algeria. Not good.

A different perspective comes from the CEOWORLD Magazine’s Health Care Index 2024 which ranks Canada 4th out of the top ten. US is no where to be seen.

The reality is the US is expensive but at best average in terms of results.

What if you say my employer pays for my health care. First of all, only about 50% of households in the US are covered by group health. The rest have Medicare, Medicaid, private paid or none. Second, according a KFF survey, the average cost for employer sponsored health care is about $9,000 and about $25,500 for family coverage. Employees and employers pay part of the total cost with the employer normally paying the largest part of the premium. However, the realty is the employee pays the entire premium because each employer knows the per employee cost of health care and factors it in when determining a salary. In Canada, when negotiating a salary, the employee knows that whatever the salary, health care is included in his/her taxes. Not the case in the US.

So, US households should add between $9,000 to $25,000 to their federal tax liability if they want to compare taxes between the US and Canada. Again, Canadian are paying much less in taxes than the combined US federal tax liability added to the US health care tax.

But that’s not enough, employees are pay deductibles and co-insurance. The average out-of-pocket costs for employees with group health insurance is a maximum of about $4,400. Canadian health care does not have any deductibles so this should part of the US health care tax. US deductibles and co-insurance should be added to your health care tax.

FYI, KFF found that about 40% of Americans have health care debt. Also, about 40% of bankruptcies in the US are related to medical expenses.

I could go on, but the reality is if you add the US health care tax to your federal tax liability, you pay much more in taxes in the US than you would in Canada.

Some may assume I think US health care is all bad. Its not, the vast majority of health care professionals are high quality individuals dedicated to their patients. This has been my experience in almost all my health care encounters and I have some experience. Over the past 25+ years, I have worked with five nephrologists, multiple cardiologists, three GPs, several oncologists and dermatologists not to mention quite a few visits to urgent care. I am alive because of the quality of health care treatment I have personally received.

But I have paid a lot for quality health insurance. When I owned my firm my share of our group insurance was well over $20,000 annually for my wife and myself. That was over five years ago. Including Medicare, supplemental Medicare coverage, prescription coverage, prescriptions not covered by insurance, my costs were over $13,000 in 2024. And this does not include health care costs outside of covered insurance costs.

Keep in mind only 15% Medicare is paid by beneficiaries like myself. The balance is paid by workers [34%] and the federal government [53%]. We have socialized medicine, we just suck at it.

There is much good in our health care services, but overall it is expensive and inefficient.

Rather then thinking Canada should be come another state, we should tear up our current health care system and rebuild using Canada as an example. The easiest way to do so is simply making Medicare for all with supplemental coverage purchased by individuals similar to Medicare supplements on the market today.

Finally, if you add in the US health care to your individual taxes paid, I suspect your would our tax rates are significantly higher than Canada.

Many want to blame Trump and MAGA Republicans for our health care problems and for sure they have been a negative factor. However, the reality is Republicans have had a negative and expensive effect on health care going back to the Obama Presidency. Any politician or political party who does not understand the combination US citizens pay in federal taxes and the health care tax is much higher than Canada’s system, probably does not have the capacity to understand much else.